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Public projects, public funds - part two

(Editor’s Note: This is Part II in our two-part series on public spending on new facilities in Clallam County. In this article we discuss the funding mechanisms. Read part one here.

Public officials in Clallam County plan to spend more than $50 million on new construction projects in the next three years. Maybe much more.

The question is, how do we pay for it?

A number of strategies will be employed, from bond issues, to loans, to state and federal funds, to private donations.

Most of the officials say the impact on individual taxpayers will be slight, if any.

And they also say today’s low interest rate provides a window of opportunity — one we’re not likely to see again soon.

• Josh Bunch, the treasurer/controller for Clallam County PUD, says his agency’s plan to spend $10.2 million on upgrades to its facility in Carlsborg will have a minor impact on rates.

He notes that utility rates, which now bring in approximately $52 million a year, are formulated to cover what PUD pays for energy, taxes, debt service and more — “whatever it costs to operate.”

That includes a great deal of capital spending on equipment and new facilities, Bunch said. He said PUD’s capital spending needs are so great that over time the $10.2 million spent on the upgrade will have little impact on the capital budget.

He said that’s particularly true because of today’s low bond rates and because the payments will be extended 20 years or more.

Bunch said he anticipates the payments will work out to about $500,000 a year. Measured against those $52 million in rate collections, that’s entirely workable, he said.

• Olympic Medical Center will borrow $20 million from KeyBank to build three new facilities — an expanded emergency room at Olympic Memorial Hospital, a new medical office building in Port Angeles and a new Sequim Surgery Center. They anticipate a 25-year term at an interest rate of 3.69 percent. OMC spokesman Bobby Beeman said the medical center “will pay down the debt from income derived from ongoing operations.”

She said OMC’s annual net income “allows us to pay principle on our debt and further invest in capital.”

• The City of Sequim will use a number of funding sources to pay for the new $15 million civic center, which includes a new city hall and a new police station.

The city recently completed the sale of $10,439,000 in bonds.

The limited tax general obligation bonds sold at a 4.53-percent interest rate.

Officials say the city will save $200,000 in annual rent payments by consolidating current facilities into the new city hall. The city also will receive approximately $225,000 annually from the 0.1 percent public safety tax passed by city voters in 2012. Another $75,000 will be drawn from the real estate excise tax, with the final $160,000 drawn from the general fund.

• Clallam County’s 10-year Capital Facilities Plan has a little more than $29 million in projected expenditures over the next 10 years, with approximately $14 million of that to be spent on the Carlsborg sewer project.

County Administrator Jim Jones said the funding for the sewer project won’t add to the tax bills of Clallam County residents.

Some $4 million of the funding will come out of the “Opportunity Fund” — a portion of the 6.5 percent sales tax the state now collects in Clallam County.

He said the state returns nine-tenths of 1 percent of that money to Clallam County because it’s one of the state’s “disadvantaged rural counties.”

“We get around $850,000 to $950,000 every year,” he said.

The county borrowed from the state the remaining $10 million “at a very low interest rate,” Jones said. The payments also will be drawn from the Opportunity Fund.

“Ultimately that entire project will be done as a result of the Opportunity Fund,” Jones said.

“The fees that we’ll collect from folks will be what’s required to keep it going — maintenance and upkeep as we go along.”

• The North Olympic Library System is considering a big expansion of the Sequim Library. Initial designs by SHKS Architects show incrementally larger facilities on the current Sequim site expanding westward toward Sequim Avenue.

Paula Barnes, executive director of the system, says it’s still too early to state exactly where the funding would come from.

She said the board is waiting on a feasibility study from consultants, who are expected to provide “a rough per square foot based on recent library construction projects in western Washington.”

She said if the board decides to expand the library, the funding mechanism will “almost certainly be a combination of a bond issue generated by a new Library Capital Facility Area (LFCA), with the remainder raised through a capital campaign.”

A LFCA is defined in the law as “a quasi-municipal corporation and independent taxing authority.”
Barnes said creating the LCFA is “a complicated project, so we’re not even sure if that’s the way to go.”

She said if the board decides to pursue the LCFA, it likely would largely follow the boundaries of the Sequim School District, though it would not include any portion of Jefferson County.

The county commissioners and the incorporated cities within the district would have to approve the new LCFA, she said.

She said if the board decides to pursue the expansion, it likely would take two issues to the voters in an upcoming election. Voters would first be asked to approve the creation of the LCFA, and then would be asked to support the sale of bonds to fund the project.

Approving the LCFA would require a yea vote by 60 percent of those going to the polls. If both items were approved, the new taxes would be added onto the property tax bills of those within the area.

• Working with BLRB Architects of Tacoma, the Sequim School District Facilities Committee is considering a laundry list of new construction projects, including building a new elementary school on Sequim’s east side, an overhaul of the Sequim High School facilities and renovation of the district’s athletic facilities.

Construction would necessitate a multi-million dollar bond proposal that area voters could see in early 2014.

District Business Manager Brian Lewis said the committee will present a list of possible projects to the school board during its Dec. 18 meeting, with the board members likely making a decision soon thereafter as to which projects, if any, they will pursue.

Lewis said he also anticipates the committee’s list also will include cost estimates.

Lewis noted that the timing of the proposal is purposeful: The district will make the last payment on outstanding indebtedness in December 2014. The new bond payments likely would begin after that point. “We’re structuring it so we’re not wrapping two bond issues around each other.”

Lewis also said the timing is intended to take advantage of what he called a “last window of opportunity” to take advantage of today’s low construction costs and favorable financing terms. He noted that materials and labor costs already are climbing, led in large part by two $500 million public education construction plans recently approved by voters in Seattle and Tacoma.

“The advantage that we have right now is low finance rates. And economists say that advantage is going to disappear in four to five years. It’s only going to be going up.”

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